GENIUS Act Passes in US Congress: A Breakdown of the Landmark Stablecoin Law

Legislation Overview

The Guiding and Establishing National Innovation for US Stablecoins Act (GENIUS Act) passed the US House on July 17, 2025, establishing the first federal oversight regime for payment stablecoin issuers.

Key Contributions

• Effective date rule — the Act takes effect on the earlier of 18 months after enactment, or 120 days after primary federal regulators issue final regulations.
• Reserve requirement — issuers must maintain reserves backing stablecoins on a strict 1:1 basis, with monthly public reporting of reserve composition.
• Prohibited practices — rehypothecation of reserves (with limited exceptions), paying interest/yield to stablecoin holders, and deceptive advertising using government-related terminology.
• Compliance obligations — Bank Secrecy Act coverage, mandatory customer identification/AML programs, and capital and liquidity requirements tailored to the issuer's business model.
• Permitted Payment Stablecoin Issuers (PPSI) — insured depository institution subsidiaries, OCC-approved nonbanks, and state-regulated issuers (capped under $10B aggregate stablecoins).
• Excluded regulators — SEC, CFTC, and CFPB have no primary regulatory role over payment stablecoins.
• Custody rules — custodians must be subject to federal/state financial supervision, treat stablecoin assets as customer property (not custodian assets), and segregate custodial assets.
• Insolvency protections — stablecoin holders get first-priority claims on reserves in custodian insolvencies; the Bankruptcy Code was amended for similar issuer-insolvency priority, excluding reserve assets from the bankruptcy estate.
• Public non-financial companies — may become PPSIs only with unanimous Stablecoin Certification Review Committee approval, contingent on a finding of no systemic banking risk.
• Foreign issuers — may operate in the US if Treasury deems their home regulatory regime "comparable"; Treasury has 210 days to render comparability decisions.
• State certification — state regimes need affirmative Review Committee approval (not assumed validity) within 30 days of submission to be certified as "substantially similar" to federal standards.

Implementation Timeline (as legislated)

• 30 days post-enactment: Treasury opens public comment on AML innovation
• 1 year post-enactment: all primary federal/state regulators complete rulemaking
• 1 year post-enactment: Treasury issues foreign-stablecoin-regime comparability rules
• 3 years post-enactment: custodians must restrict activity to approved issuers only

Comparison Note

The article positions GENIUS as stricter than the earlier STABLE Act on state certification procedure, adds insolvency provisions for issuers, restricts public-company participation, and directs Treasury to study (rather than moratorium) endogenously collateralized stablecoins.

Limitations

Law-firm client-alert analysis, not a primary legislative text citation; written at time of passage (before implementation rulemaking began) — treat listed deadlines as the legislated framework, not as confirmed regulator output.

Source: GENIUS Act Passes in US Congress by Morgan Lewis staff